Morgan Stanley ‘to buy out partner Citi’

Investment bank Morgan Stanley is interested in buying out Citigroup from the pair’s wealth management joint venture in an estimated $10 billion (£6.3bn) deal.

Under the terms of the joint venture, Morgan Stanley will get an option in May to buy a further 14 per cent of Morgan Stanley Smith Barney from Citigroup, adding to the 51 per cent stake it already has. It has options to buy the remaining portion in two more chunks through to May 2014.

It is thought both sides are interested in doing a deal for Citigroup’s entire 49 per cent stake this year instead of waiting for two more years.

The US Federal Reserve this month denied Citigroup’s request to raise dividends after the bank failed a stress test. Selling its entire stake in the joint venture would give it more flexibility to pay higher dividends. Both banks declined to comment.